Q231. Which of the following statements about Revenue Expenditure is incorrect?
Indian Economy: RAS Prelims MCQs
848 RAS Prelims practice MCQs on the Indian economy are on this page, in 10 chapters. They cover economic growth and development, the Human Development Index, monetary and fiscal policy and the Union Budget, fiscal federalism, agricultural development, industrial reforms and LPG, the service sector, energy and transport, skill development and employment, and social justice. Each question has an answer and an explanation.
Practice questions based on the RPSC RAS Prelims syllabus. They follow the exam pattern but are not past-paper questions.
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Q232. Read the following statements and select the correct option.
Statement I: Capital budget consists of capital receipts and capital payments.
Statement II: Grants given by the Union Government to State Governments for the creation of capital assets are strictly classified as Capital Expenditure in the Union Budget.
Statement I: Capital budget consists of capital receipts and capital payments.
Statement II: Grants given by the Union Government to State Governments for the creation of capital assets are strictly classified as Capital Expenditure in the Union Budget.
Explanation
The capital budget encompasses all transactions that impact the government’s assets and liabilities, including receipts like loans and expenditures like infrastructure building. Although grants given to states for asset creation serve a capital purpose, they are accounting-wise recorded as revenue expenditure in the union budget. This is because such grants do not directly create assets owned by the central government.
Q233. Match the items in List I with their budget classification in List II.
| Item | Budget Classification |
|---|---|
| A. Income Tax collected | i. Capital Receipt |
| B. Repayment of a loan by a State Government | ii. Capital Expenditure |
| C. Interest paid on national debt | iii. Revenue Receipt |
| D. Construction of a national highway | iv. Revenue Expenditure |
Explanation
Income tax represents a recurring revenue receipt, while the repayment of a loan by a state reduces an asset, making it a capital receipt. Interest paid on debt is an operational cost classified as revenue expenditure. Conversely, the construction of a national highway involves the creation of a physical asset, which is correctly categorized as a capital expenditure for the government.
Q234. Which of the following is NOT an example of Non-Tax Revenue for the Union Government?
Explanation
Non-tax revenue includes income from sources other than taxation, such as interest on loans, dividends from enterprises, and fees for services. These are distinct from compulsory levies on income or profits. Corporate tax, regardless of whether it is paid by domestic or foreign entities, is a direct tax and therefore forms a major part of the government’s tax revenue category.
Q235. Which of the following provides the most appropriate distinction between a revenue receipt and a capital receipt?
Explanation
Revenue receipts are recurring and do not create any obligation for future repayment or result in the loss of assets. They represent the government’s regular income. Capital receipts, however, are non-recurring and either involve borrowing that must be repaid later or the sale of assets like shares in public companies. This fundamental difference determines the long-term impact on financial health.
Q236. Consider the following statements regarding the components of the Government Budget:
I. The budget is primarily divided into the Revenue Account and the Capital Account.
II. Defense equipment purchases are universally classified as revenue expenditure.
III. Borrowings from the public are classified as capital receipts.
IV. Disinvestment proceeds are categorized under the revenue budget as they provide immediate cash.
Which of the above statements are incorrect?
I. The budget is primarily divided into the Revenue Account and the Capital Account.
II. Defense equipment purchases are universally classified as revenue expenditure.
III. Borrowings from the public are classified as capital receipts.
IV. Disinvestment proceeds are categorized under the revenue budget as they provide immediate cash.
Which of the above statements are incorrect?
Explanation
The budget is split into revenue and capital accounts for better financial management. While borrowings are indeed capital receipts, the classification of defense equipment can vary, and disinvestment proceeds are non-debt capital receipts, not revenue. Categorizing disinvestment as revenue would be incorrect because it involves the sale of government assets, which fundamentally alters the capital structure of the entire public sector.
Q237. Identify the correct pair among the following budget concepts.
Explanation
A balanced budget occurs when the total estimated receipts are exactly equal to the total planned expenditures for a fiscal year. In contrast, a surplus budget happens when revenues exceed spending, and a deficit budget occurs when spending is higher than revenues. The primary deficit specifically refers to the fiscal deficit excluding interest payments on previous debt, representing current policy outcomes.
Q238. The Government of India plans to fund a massive railway expansion project through market borrowing. Under which head of the budget will this borrowing and the subsequent spending on railways be recorded respectively?
Explanation
Market borrowing is a form of debt that creates a future liability for the government, thus it is recorded as a capital receipt. The subsequent spending on a long-term infrastructure project like railway expansion leads to the creation of a physical asset. Therefore, this spending is classified as capital expenditure, reflecting the investment nature of the project on the government balance sheet.
Q239. Fiscal Deficit is defined as the excess of total expenditure over:
Explanation
This measure represents the total gap between the government’s total expenditure and its non-borrowed receipts. It indicates the total amount of money the government needs to borrow from various sources to cover its spending requirements. By excluding borrowings from the receipt side, it provides a clear picture of the government’s financial health and its dependence on debt for various regular operations.
Q240. Consider the following statements regarding deficit measures:
I. Revenue deficit indicates that the government’s regular revenue is not sufficient to meet its regular expenditure.
II. Fiscal deficit is a comprehensive measure that indicates the total borrowing requirements of the government.
III. Primary deficit is calculated by deducting interest payments from the fiscal deficit.
IV. A zero primary deficit means the government is borrowing only to pay interest on past debts.
V. Effective revenue deficit excludes grants given for the creation of capital assets.
Which of the above statements are correct?
I. Revenue deficit indicates that the government’s regular revenue is not sufficient to meet its regular expenditure.
II. Fiscal deficit is a comprehensive measure that indicates the total borrowing requirements of the government.
III. Primary deficit is calculated by deducting interest payments from the fiscal deficit.
IV. A zero primary deficit means the government is borrowing only to pay interest on past debts.
V. Effective revenue deficit excludes grants given for the creation of capital assets.
Which of the above statements are correct?
Explanation
Revenue deficit shows the gap in regular income and spending, while fiscal deficit captures total borrowing needs. Primary deficit excludes interest to show current fiscal pressure. A zero primary deficit means borrowing is only for past interest. Effective revenue deficit adjusts for grants that create assets. Together, these indicators provide a comprehensive view of the government’s fiscal position and long-term sustainability.Answer key for these questions
| Q | Correct answer |
|---|---|
| 231 | (b) It directly results in the creation of productive physical assets |
| 232 | (c) Statement I is correct but Statement II is incorrect |
| 233 | (a) A-iii, B-i, C-iv, D-ii |
| 234 | (d) Corporate tax paid by foreign companies |
| 235 | (c) Revenue is non-redeemable; capital involves future repayment/sale |
| 236 | (b) II and IV only |
| 237 | (d) Balanced Budget - Revenues equal expenditures |
| 238 | (a) Capital Receipt and Capital Expenditure |
| 239 | (c) Total receipts excluding borrowings |
| 240 | (d) I, II, III, IV and V |
Key facts from Indian Economy
- The RPSC syllabus lists economic concepts and the Indian economy as the first part of the Economy paper, followed by the economy of Rajasthan.
- Concept questions test definitions: nominal and real GDP, GNP and NDP, per capita income and the value-added method.
- Policy questions pair a tool with its effect, for example a rise in CRR reduces the lendable resources of banks.
- Scheme questions ask for the target group, ministry or year of schemes such as PMKVY, NAPS, PM SVANidhi and PM-SYM.
- Questions on Finance Commission and GST link the body to its Article, such as Article 280.
Frequently asked questions
How many RAS Prelims practice MCQs are there on Indian Economy?
This page has 848 practice MCQs on Indian Economy. Each has the correct answer, and most have an explanation.
Which chapters does the Indian economy set cover?
Ten chapters: economic growth, development and sustainable development; measurement of development (HDI); monetary and fiscal policy and the Union Budget; fiscal federalism and the Finance Commission; agricultural development; industrial growth and LPG reforms; the service sector; energy, transport and communication; skill development and employment; and social justice and empowerment.
Is the Indian economy in the RAS Prelims syllabus?
Yes. RPSC lists Economic Concepts and the Indian Economy as the first part of the Economy paper. The second part covers the economy of Rajasthan, which is on its own page.
How should I revise economy for RAS Prelims?
Learn the definitions and the cause-and-effect chains first, then the schemes with their year, ministry and target group. Attempt each chapter, read every explanation and keep a one-line note for each scheme and body.